Senate bill targets online cigarette sales

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Wired magazine has an article discussing the "Prevent All Cigarette Trafficking Act of 2003", introduced by Sen. Orrin Hatch (R-Utah) and Sen. Herb Kohl (D-Wis.). I had a feeling something like this was coming, with many states crying about how much money they're "losing" to online cigarette sales.

The rationale for the law: "[C]oncern that contraband cigarettes contribute heavily to the profits of organized crime syndicates, especially global terrorist organizations." According to Hatch, "The Internet has 'exacerbated' the problem, as crime syndicates purchase cigarettes in states with low tobacco taxes and sell them to customers in states with high ones."

Some nice highlights from the bill:

1. Records of sales must be kept on file for 5 years. Record keeping requirements in general for cigarette sellers would become more stringent.

2. Violations of this law are punishable as a felony by up to a $100,000 fine or up to 2 years in jail. An additional civil penalty of up to 2% of gross sales of the previous 12 months may also be imposed.

3. Delivery of cigarettes through the U.S. Mail is prohibited.

4. The Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) is charged with enforcing this law. Currently, the FBI is charged with enforcing federal cigarette tax laws.

The only "organized syndicates" I am worried about here are Congress and the state legislatures. Smokers make an easy target for taxation since they are in the minority. People are trying to evade cigarette taxes because they are too high. The obvious solution is lower cigarette taxes - not even higher taxes and more laws with jail sentences and hefty fines (as Congress and the legislatures would like to believe).

2 Comments

Do you know if this law would enable states to collect taxes retroactively on sales made before this bill is passed?

As far as I know, states have always had the ability to collect unpaid taxes as long as the statute of limitations had not run out. I don't see how this law would change that.